Major Facts
TAM is dying. The company has a logistic and supply management system based on pure guesswork and solving contingencies. The revenues are low, sometimes lower than expenses yet they are paid on average 54 days late. The company has a massive employee turnover which is extremely expensive and detrimental more so to the secrets of the company. The main supplier considers TAM as a minor customer thus TAM has to operate at the whims of the supplier. Finally, the company is suffering from archaic leadership and management systems. Each and every process begins and ends with the propriety Jack Reynolds. Further, the company’s management style hasn’t changed much since it was a miniature corporation in spite of expanded market and revenues.
Major Problem
Currently, the company is spending too much on inventory, warehousing, and contingency-based supplies yet not making enough profits thus it faces a threat of eventual collapse.
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Possible Solutions
The company needs a major reevaluation of its entire management system followed by a complete overhaul thereof. The overhaul must include a personnel change, beginning with Jack Reynolds relinquishing active control of the company. The main disadvantage of this approach would be implementation difficulty with Jack being the main shareholder. The main advantage would be that most of the problems in the organization would be solved if technocrats were allowed to operate freely.
Another possible solution would be to leave Jack in charge but develop a comprehensive delegation system that empowers the several departmental leaders to make decisions as they deem necessary and expedient without having to revert to Jack. The advantage of this solution would be to ease of implementation as it does not entail relegating Jack. It would, however, have the disadvantage that it does not rule out intermeddling by Jack.
Another viable solution would be to outsource the production system in its entirety including the selling of the production plant in Cleveland; Ohio. The company that buys the production division can also be handling logistics and supply chain management which clearly TAM has failed to manage. The main disadvantage lies in the fact that the company and its revenues would decrease considerably. However, the advantage lies in the fact that the company can now focus on marketing problems alone while now it has to grapple with marketing, production, and logistics problems within the supply chain.
Choice and Rationale
The Most viable solution is the second solution that entails Jack retaining his seat at the epitome of the company but with severely trimmed powers. This solution has the major advantage of the ease of implementation as compared to the others, more so due to the character and temperaments of Jack. It would be better to get him out of the company or sell one segment thereof but that idea would be hard to sell to him, hence settling on the second option as a compromise solution.
Appendix
Question 1
The outside sales staff who have been hired on a contract basis and bear no loyalty to TAM are a fundamental problem for the company on a multilevel basis. Every attempt made by the company to remedy the problem while still retaining these outside sales staff, through carrot or stick has failed. The only solution to the problem is, therefore a drastic one. It entails hiring formal loyal sales teams, who work for and are answerable to TAM to handle this market segment and place it directly under TAM control. Considering that the 15% market ratio handled by this group can be expanded, the second option would be the most ideal.
Question 2
TAM has been investing in expensive advertising regimens in an attempt to retain its client base as well as expand them but to no avail. Marketing drives that do not produce viable returns, yet cost the company exponentially contribute to overall losses. The solution, therefore, lies in conducting in-depth research on what modern customers want to hear about their tea. TAM should then use this information to prepare circumspect adverts and promotion schemes built to resonate with the customers. This will not only maintain the current market but also expand it.
Question 3
TAM has been selling tea in the same localities for over three decades. The records can give near-exact data on the spending and purchasing patterns of TAM’s consumers and retailers. Therefore, through internal research combined with external research to enable the fine-tuning of the data, TAM can be able to determine how much of each variety of tea they need. These estimates should be made for each calendar month. Once this is established, TAM can approach EML of London and propose a month-based production regimen. If EML does not agree, then TAM must consider finding another middleman, most preferably in the East where most of the tea comes from.
Question 4
An average payment duration of 54 days without charging interest or penalties for the same is extremely expensive and detrimental for TAM. Better sales through better marketing as well as better relations will improve payment durations. Finally, TAM can introduce a prompt payment discount where a retailer who pays for goods on delivery gets the largest discount with the same diminishing as the duration before pay stretches out. This will make retailers eager to pay early and not alienated in the process.
Question 5
With the current system of placing orders twice a year, it would be almost impossible to develop ceremonial offers and marketing strategies. However, as indicated in question three, TAM must find a way of ordering tea on a monthly basis. This will make it possible to prepare brands based on current affairs, seasons, and even special days such as Christmas and Easter. Celebratory spending is one of the most common reasons for impulse buying more so for products priced higher than their value. It is also a special time for TAM to introduce its products to new customers. Therefore, TAM cannot afford to do without special offers. Instead, based on the new logistics regimen, combined with research-based innovative marketing, TAM can ensure that special occasions work to their advantage, not that of their opponents.
Question 6
Online marketing is the way to the future of selling commodities. TAM must invest in a comprehensive online sales platform and then partner with a delivery company. Eventually, TAM can even begin serving loyal customers directly and pocket the monies paid to sales teams and retailer profits.
